Power tariffs set to drop

MINI BUDGET 2004

Continuing its focus on the transmission and distribution areas of the power sector, the government has announced a reduction in customs duty on power transmission and distribution equipment from 25 per cent to 10 per cent.

Customs duty on electricity meters has also been cut from 25 per cent to 15 per cent.

The move to cut duty on distribution equipment is, however, likely to have only a marginal effect on the country's distribution equipment business, valued at more than Rs 2,500 crore, according to private sector equipment manufacturers. This was largely because much of the transmission and distribution equipment was indigenously manufactured, they said.

Use of imported equipment in the distribution sector is restricted largely to the new electronic meters, which are being imported by several of the State Electricity Boards (SEBs) from China and other Asian countries.

"SEBs, including those of Uttar Pradesh and Karnataka that are installing imported electronic meters, would benefit on account of the 10 per cent reduction in the duty on meters," a power ministry official said.

In case of the transmission sector, the effect of the duty reduction will be felt on projects being set up through the international competitive bidding route. Transmission sector projects being set up through this route will see a reduction in overall costs due to a lowering of the duty, according to a senior PowerGrid Corporation official.

Also, several domestically manufactured transmission sector components use imported raw material. This could result in a lowering of costs.

Equipment suppliers like Bharat Heavy Electricals Ltd do not see a very significant impact of the duty reduction. "There are not many instances of piecemeal imports of transmission equipment. Much of the imports in the transmission sector happens by way of full project imports and hence the move to prune duty on transmission equipment would not have a major impact," a BHEL official said.